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akornegay2
27.11.2019 •
Business
Vinca inc. has paid a dividend of $1.2 a share last year. yesterday, the firm announced that the dividend will increase by 10 percent each year for the next three years, after which time the dividends will increase by 4 percent annually. the required return on this stock is 12 percent. what is the current value per share?
a. $16.31
b. $14.70
c. $20.76
d. $18.24
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Ответ:
option (d) $18.24
Explanation:
Data provided in the question:
Dividend paid last year = $1.2
Dividend growth rate for 3 years, g = 10%
After 3 years Dividend growth rate, g' = 4%
Required return, r = 12%
Now,
Present vale factor, PVF =![\frac{1}{(1+i)^n)}](/tpl/images/0392/9585/50710.png)
Year Dividend PVF @12% Dividend × PVF
1 1.2(1+.10)= 1.32 0.89286 1.1786
2 1.32(1+.10)= 1.452 0.79719 1.1575
3 1.452(1+.10)= 1.5972 0.71178 1.1369
3(Terminal value)20.7636 0.71178 14.7791
=====================================================
Current share price ∑(Dividend × PVF ) ≈ $18.24
Note:
Terminal value at year 3 =![\frac{D3(1+g')}{(r-g')}](/tpl/images/0392/9585/10de9.png)
=![\frac{\$1.5972(1+0.04)}{(0.12-0.04)}](/tpl/images/0392/9585/c22c1.png)
= $20.7636
Hence,
The correct answer is option (d) $18.24
Ответ:
Explanation:
again
check additional details in the attached file